Central Bank asks Amlak to submit ‘capital plan’ before March-end

By CL Jose

Accumulated losses at AED2.28 bn account for 152 pc of paid up capital

DUBAI/March 21-2021: Even while frenetic measures are on to mitigate the pressure posed by the huge debt burden accumulated over years, Amlak Finance, the leading real estate financier, is confronted with the spectre of a fast growing accumulated loss that have already swallowed a big chunk of the company’s equity base.

The Central Bank of UAE has directed Amlak to submit a plan by March 31, 2021 to increase the aggregate capital by early converting Mudaraba instrument into share capital.

Accumulated losses

The accumulated losses have grown to AED2.28 billion as of December 31, 2020 accounting for 152 per cent of Amlak’s paid-up capital at AED1.5 billion.

Total equity of the Islamic financier, which is 45 per cent owned by Emaar Properties, has nosedived from AED808.72 million to AEDAED244.53 million in the past year alone.

Large fair value loss

The large fair value loss on investment properties at AED462.96 million against AED18.24 million last year, and the loss on sale of investment properties at AED84.24 million during 2020, landed the company in AED437.98 million loss in FY20 compared with a loss of AED319.78 million in the previous year.

The Central Bank in its examination report pointed out that, under the present pandemic situation, the Dubai Financial Market (DFM)-listed Amlak Group is likely to incur more losses and does not have sufficient aggregate capital to absorb any further losses.

“Therefore, the Central Bank (CB) advised that the Group should refrain from underwriting any new financing activities. From regulatory point of view, CB has excluded Mudaraba instrument to calculate Group’s aggregate capital,” Amlak has said in its annual report.

The company, whose assets have contracted by a quarter from AED5.31 billion to AED3.99 billion in a single year, has managed to increase its revenue in 2020 slightly to AED283 million from AED 279 million in 2019, excluding fair value losses on investment properties and gain on debt settlement.

Debt settled

Amlak said it has paid as of FY20-end, 47 per cent of its Islamic deposit liabilities and 25 per cent of Mudaraba Instrument relating to financiers (Tranche B).

During 2020, the company paid AED164 million to liquidity support providers (Tranche A) and with this payment, Amlak has fully settled AED1.69 billion of its high-cost exposure relating to Tranche A, without any default over six years.

Hit from Pandemic

Ali Ibrahim Mohammed (seen in the picture), Chairman of Amlak Finance, said that as expected, and communicated previously, the unprecedented economic challenges of Covid-19 negatively impacted Amlak Finance’s 2020 financial results.

“Amlak Finance remains focused on leveraging all opportunities to navigate this period and remain on course to meet our ambitious goals for 2021 and beyond,” the Amlak chairman said.

Arif Albastaki, CEO of Amlak Finance PJSC, said as the COVID-19 crisis took hold, Amlak Finance pivoted during 2020 to make a series of value-enhancing changes to its operating model that mitigated the pandemic’s negative impact on the company’s business, and positioned the company for further growth.

“We successfully renegotiated an agreement with all the financiers as part of the debt restructuring,” Albastaki added.

Leave a Reply

Your email address will not be published. Required fields are marked *